The Biden administration has approved billions of dollars in student loan forgiveness under the Limited PSLF Waiver, a temporary initiative that has expanded eligibility through the Public Service Loan Forgiveness program, according to new data from the Department of Education.
Hundreds of thousands of borrowers have directly benefited from this relief. And unlike Biden’s one-off student debt relief initiative, which continues to be blocked by federal courts, implementation is underway.
Here’s the latest.
Student loan forgiveness under the PSLF waiver will continue even after the first phase ends
The Public Service Loan Forgiveness (PSLF) program can pay off state student loan debt for borrowers who are in the public sector as employees of certain non-profit or government organizations. After 10 years of qualifying employment, the borrower may receive tax-free student loan forgiveness under federal law.
However, the PSLF program has been plagued with problems for years. The program had complicated eligibility requirements, with strict rules about what constitutes a “qualifying payment” that counts towards the 120 payments required to receive loan forgiveness. A mistake by a borrower – such as For example, making a payment under the wrong plan or consistently being late or early – could jeopardize eligibility. The rules were often poorly or not at all communicated to the borrowers by the credit service providers. The result was a dismal approval rating.
The Limited PSLF Waiver announced by the Biden administration last year was intended to address these issues. Under the waiver, the Department of Education may retroactively count many past loan repayment periods as “qualifying payments” to PSLF, regardless of the type of federal student loan or repayment schedule, or whether a payment was made in full or on time. A related initiative called IDR Account Adjustment allows certain past periods of deferral and forbearance to count towards PSLF as well.
Although the limited PSLF waiver ended on Oct. 31, the Department of Education and MOHELA (the PSLF loan administrator it appoints) are still processing a backlog of submitted applications. The administration has so far approved $24 billion in student loan forgiveness for 360,000 borrowers through October under the waiver, according to new data released by the department last week. And there’s more to come, as the data doesn’t include the many PSLF forms the department received closer to Oct. 31, according to a department official.
More student loans will be issued in the coming months
While the limited PSLF waiver officially ended last month, many of the program’s flexibilities and benefits are effectively expanded through the companion program, IDR Account Matching.
Just like the limited PSLF waiver, the IDR account adjustment will allow the Department of Education to retroactively credit many past repayment, deferral, and forbearance times for student loan forgiveness under 20-year and 25-year Income Driven Repayment (IDR) terms. However, these periods can Also for borrowers who have worked in qualified government positions during the creditable periods count towards the PSLF.
The adjustment of the IDR account is not yet complete. According to an Education Department official, 90,000 of the 360,000 borrowers already approved for student loan forgiveness under the limited PSLF waiver were able to have deferral and forbearance periods credited to the PSLF through the IDR account adjustment.
The Department of Education is continuing to process PSLF applications already submitted before the Oct. 31 deadline, and this process is expected to continue throughout the winter. In the meantime, PSLF borrowers who missed the October 31 waiver deadline may still be able to benefit from the IDR account adjustment. The implementation of this initiative is not expected to be completed before July 2023.
Impact of student loan forgiveness comes into focus
The impact of student loan forgiveness on PSLF borrowers has been profound, according to new data released this week by the Student Borrower Protection Center (SBPC) and research teams from the University of Memphis and the University of Michigan.
Using survey data collected over the summer, when the Limited PSLF Waiver was gaining momentum, the researchers found that PSLF borrowers’ homeownership rates rose as they got closer to receiving student loan waivers. The creditworthiness of the borrowers has improved significantly after termination. And borrowers reported less psychological distress as they neared the 120 qualifying payments and then received student loan forgiveness. But in the years leading up to termination, borrowers reported financial and psychological distress.
“These preliminary results help us better understand the benefits of realized debt relief and underscore the need to ensure borrowers are accounted for [the PSLF program] enjoy reliable avenues to promised debt relief,” reads the report’s summary.
“This report is a step in understanding the benefits of student loan forgiveness under the PSLF or any other program,” said Dr. Dan Collier and Dr. Dan Fitzpatrick, the authors of the new paper, in a statement Tuesday. We have found that receiving a loan forgiveness from PSLF has important financial and health benefits. However, being on the path to enactment does not bring a proportionate share of these benefits. Borrowers with loan balances several years from forgiveness are showing some stress measures that are justifiably worrying.”
More reading on student loan forgiveness
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